Oil Gets Together

The Government made a beau geste to business when it did not appeal the decision of the Circuit Court of Appeals in St. Louis permitting Standard Oil Co. of New York and Vacuum Oil Co. of New York to merge (TIME, June 15). Straightway every oil merger rumor of the last three years came to life. Last week a gusher of oil news spouted on the front page of every newspaper. Of greatest magnitude was the announcement that

Walter Clark Teagle, president of Standard Oil Co. of New Jersey, and Kenneth Raleigh Kingsbury, president of Standard Oil of California, had kept a rendezvous at Lake Tahoe, Calif., each with his corps of clerks and lawyers and were "resuming discussions tentatively initiated more than two years ago." Should they come to terms, a $2,381,000,000 combination might result, largest oil unit in the world.

Full-blown and final, but later reduced again to uncertainty, was the week's next biggest oil story: that Harry Ford Sinclair had finally succeeded in putting together his company with Tide Water, the Prairie interests and Rio Grande into a billion-dollar structure.

Skelly Oil Co. furnished a third story by having its name mentioned in connection first with Texas Corp., then with the Sinclair group.

Men have attributed many ambitions to Harry Ford Sinclair: to clear his name of the Teapot Dome charges; to own another horse like his famed Zev; but mostly to build a billion-dollar oil company, an ambition worthy of his luck and judgment. Last week's report that Sinclair had succeeded, pictured a merger of the following:

Sinclair Consolidated Oil Corp., assets $404,000,000.

Tide Water Associated Oil Co., assets $248,000,000.

Prairie Oil & Gas Co., assets $195,000,000.

Prairie Pipe Line Co., assets $178,000,000.

Rio Grande Oil Co., assets $53,000,000.

Combined assets: $1,078,000,000.

The reported plan called for the formation of a new company to be known as Commonwealth Petroleum Corp. with 25,000,000 shares of common stock outstanding, and no preferred. Common stockholders of Sinclair and Prairie Oil & Gas would receive one share of the new company's stock for each share now held. Tide Water stockholders were to get eight new shares for ten old, Prairie Pipe Line ten for 14. The terms for Rio Grande were not estimated but at current prices of the "scratch" securities and Rio common it looked as though holders of the latter would be offered ten Commonwealth shares for 25 Rio Grande. Sinclair preferred, of which there were 141,290 shares outstanding, was to be retired at the call price, $110. What disposition would be made of Tide Water preferred was not suggested.

Back of the enterprise stood other figures besides cheerful, energetic Harry Sinclair. In all his schemes he has had the loyal backing of Blair & Co. and the succeeding firm, Bancamerica-Blair. Although other banks, notably Chase National of New York, have representatives on Sinclair's board, his company and the Prairie concerns are considered particularly the interest of Bancamerica-Blair. Tide Water Associated presents another aspect. On its board are two representatives of First National Bank of New York. Jackson Eli Reynolds, its president, and Henry S. Sturgis, a vice president. There is a Blair man too, but this company is First National territory and as such its stockholders have had much confidence that whenever a merger was accomplished their interests would be amply protected by the astute gentlemen who serve both them and First National Bank.

In 1928 this merger was first discussed with only Sinclair and the Prairie Companies mentioned. Rumors of consummation and official denials followed one another in bewildering succession. Then came Depression and each man looked to his own balance sheet, forgot about mergers. But in 1930 Harry Sinclair took a big step. He sold his half interest in Sinclair Pipe Line Co. and Sinclair Crude Oil Purchasing Co., to Standard Oil Co. of Indiana. A check was written for $72,500,000; Sinclair Consolidated's profit was $28,000,000, a welcome sight on any statement in 1930. It made the company's net $12,000,000 for the year, left it with $35,000,000 in cash on hand. It put Mr. Sinclair in a fine position to go mergermaking.

Publication of the Sinclair plan swiftly revealed its unfinished parts. Rio Grande stockholders were dissatisfied with the ratio offered them; they wanted one share of the new stock for two of Rio Grande common. Some stockholders of the Prairie companies were petitioning John Davison Rockefeller Jr., reputed one of Prairie's largest stockholders, to fight the merger. Unfair share exchange was their cry, too, plus a moralizing note, stubborn aftermath of the unhappy Teapot Dome affair.* These seemed to be matters which tact and patience could straighten out. But as the days went by something much more fundamental was happening to throw the great Sinclair merger out of gear. With Oklahoma and Texas getting out their militia to halt production (see p. 9), the price of crude oil started to rise. Prairie Oil & Gas Co., key to the Sinclair merger, has an inventory of about 55,000,000 barrels of crude. The company began to grow more valuable, by millions of dollars, than it was a week ago. New merger terms might be necessary, stockholders' consent more difficult to obtain.

When Harry Ford Sinclair was a druggist in Independence, Kan., he was not a success as a businessman. That was during the last years of the 19th Century when Sinclair was a youth and had taken over the store left him by his father. His store finally taken from him, the young man idled about the town and one day went rabbit hunting. He shot himself in the foot accidentally and was maimed for life, slightly. But this accident was really his first piece of luck for it provided him with $5,000 cash, the payment on an insurance policy. Brought up by his father on strict principles of economy, he paid his doctor's bills but departed forever from the narrow, commercial confines of Kansas.

He and a friend pooled their resources and invested them in Oklahoma oil lands.

This first venture, at Kiowa, was lucky. It netted Sinclair $100,000, a nice sum but nothing in comparison to what was coming. By 1909 with luck and judgment he made a million buying, developing and reselling oil lands. Independent, working mostly alone he continued on this line until 1926 when he consolidated seven small companies into Sinclair Oil & Refining Corp. The company grew and prospered apace. Fleets of tankers roamed the seas carrying the name Sinclair. This alert, grinning, hard-headed man's influence was felt in Moscow, Lisbon, Africa, while his company became integrated, rivalled some Standard Oil units.

Then came a break in Harry Sinclair's luck, a mistake in judgment. His Teapot Dome lease made in 1922 provoked a scandal which came to light in 1923. For five years a complicated battle raged in the courts. Harry Sinclair faced the bar of a Federal Court five times in those years, always smiling, debonair, sure of himself. His mood changed to dejection one night in May 1929 when he entered the District of Columbia jail to serve six and one-half months for contempt of the Senate and for jury shadowing, charges arising out of his long battle to escape the more serious accusation of bribery.

Through the long years when his liberty was at stake Harry Sinclair never neglected his company. He travelled with a staff of secretaries and assistants; received reports, laid plans, dreamed probably as much about developing Sinclair Consolidated Oil Corp. as he did about keeping out of jail. Beside his brother through these humiliating times stood Earle Westwood Sinclair, president of Sinclair Consolidated Oil Corp. since 1921. Trained as a banker in the Southwest where oil is the basis of most wealth, Olde Brother Earle came to know the petroleum business as well as his own. While Brother Harry was packing pills in the Washington jail, he carried on, the company prospered. He still administers many of the company's affairs with vigor while Brother Harry travels, negotiates, tries to build his career's monument.

*Last week in France died James E. O'Neil, one of the key witnesses in the Teapot Dome suits who fled the U. S. in 1924, lived in affluent exile (see p. 27).

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